Owning a rental property is one of the most popular types of investments amongst Australian taxpayers. To maximise the benefits of ownership, here are a few tips.
Have a Quantity Surveyor prepare a Depreciation Schedule – This is usually worth tens of thousands of dollars in tax deductions over the life of a loan. It is also the most overlooked item. Quantity Surveyors prepare this report by going through a property and itemising the various fixtures & fittings. Even older premises usually have significant deductions. Call our office and we can arrange for one of the reports to be prepared should you wish.
Prepare a Pay as You Go Variation – Rental properties often result in the owner having a large tax refund at year end. Why Wait! Berkmans can prepare the paperwork so that your employer withholds less tax from each pay. This means more take home pay for you NOW, rather than waiting till year end.
Ensure the loan structure is correct - Most people borrow to buy their rental property. Often, they redraw on their residential home to acquire the property. If a loan is not structured appropriately, it can have serious tax consequences costing thousands. A good rule of thumb is to ensure separate loan accounts exist for each property. Pay the minimum off the rental loan and pay any additional funds off other non deductible debt first – such as the family home. Be very careful not to use a line of credit arrangement whereby salary and other income is paid into a rental loan and the living expenses are drawn from the same account.
Where possible – do not use one house as a security over another.Banks love taking security of multiple assets if they can. If this can be avoided, it can save major headaches. When looking to sell one of the properties, the fact that a 2nd property has security can complicate the sale or result in expensive re-financing.
Utilise an Agent – Agents are expert in dealing with tenants. They know the laws and are better equipped at ensuring rent is paid on time. Agents will also pay for various expenses from rent . The beauty of this is at year end almost all your expenses are recorded in the Agent Statement – meaning less work for you in preparing for your tax.
Ownership – Before finalising the acquisition, please give us a call regarding who the owner of the property should be. Should it be yourself, your spouse, jointly held or perhaps even a Family Trust or Self Managed Superannuation fund? There are a number of things to consider here . Taxation, Asset Protection, Land Tax to name just a few. Getting these things right is critical – as changing at a later stage may involve additional stamp duty or capital gains tax.
These are just a few things to consider when owning a rental property. There are numerous other things to consider which may apply depending on your personal circumstances.
If you are considering acquiring a rental property, give us a call on (02)43 51 2622 so we can assist you in achieving the best possible outcome .
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paid by your tenants. This is an ideal arrangement that makes it possible for you to enjoy the tax breaks while watching your property value continue to appreciate. If done properly, this can be your bread and butter to sustain your daily needs.